Terminal Cash Flow without OCF
Terminal Cash Flow = After Tax Salvage from Equipment Disposal + Change in Working Capital
After Tax Salvage from Equipment Disposal = Salvage Value – Tax (Salvage Value – Book Value)
=7,000,000 - 0.20(7,000,000 - 5,760,000) = 6,752,000
Change in Working Capital = 600,000
Terminal Cash Flow = 6,752,000 + 600,000 = 7,352,000
Initial Investment in the Project
Initial Investment in the Project = Initial Capex + Change in Working Capital
= 12,000,000 + 600,000 = 12,600,000
Hope this helps, feel free to share your feedback.
Frito Lay is considering a new line of potato chips. This will be a two year...
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